The Courier-Mail

Bet­ter off with­out bank tax

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THE Fed­eral Gov­ern­ment’s de­ci­sion to fi­nally dump a leftover La­bor plan to have a banks de­posit tax as an in­sur­ance against a ma­jor fail­ure in the fi­nance sec­tor is welcome, even if it raises more doubts about the abil­ity to rein in the still-too-large Bud­get deficit.

If we were to be­lieve the rhetoric of Prime Min­is­ter Tony Ab­bott, this was another tax on peo­ple’s sav­ings, even if it is im­posed at a low rate on the banks and not de­pos­i­tors.

It does add to the cost of bank­ing and would have been passed on to cus­tomers one way or another.

Any move to lower the tax bur­den on busi­ness can only help, es­pe­cially at a time when eco­nomic in­di­ca­tors are point­ing to a de­te­ri­o­rat­ing sit­u­a­tion within Aus­tralia and in­ter­na­tion­ally.

The ar­gu­ment for the tax – which was op­posed by the head of the Fi­nan­cial Sys­tem In­quiry David Mur­ray – lost some of its force when new pru­den­tial reg­u­la­tions would in­crease the cap­i­tal ad­e­quacy re­quire­ments of fi­nan­cial in­sti­tu­tions.

The $500 mil­lion a year it was ex­pected to raise needs to be mea­sured against the pos­si­ble dis­rup­tion of the bank­ing sec­tor. The play­ing field could easily be skewed in favour of big banks as smaller in­sti­tu­tions lose cus­tomers who find sav­ing less at­trac­tive.

At the same time the big banks could be forced to rely on the riskier whole­sale fund­ing mar­kets which were tested dur­ing the global fi­nan­cial cri­sis.

We are bet­ter off with­out this leftover La­bor tax.

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